TEXT-Fitch rates Taiwan's Chailease Finance 'BBB-'/stable

Jan 11 - Fitch Ratings has assigned Taiwan’s Chailease Finance Co. Ltd. (Chailease) a Long-Term Foreign Currency Issuer Default Rating (IDR) of ‘BBB-’ with Stable Outlook. A full rating list is detailed at the end of this commentary.

Chailease’s ratings reflect its dominant franchise in leasing/instalment finance in Taiwan, resilient business model with a long operating history and reasonable balance sheet strength. Despite its small asset size, its balance sheet strength and earnings performance are generally comparable to global peers. The ratings are constrained by potential risks to growth in China and its reliance on wholesale funding, which is sensitive to investor sentiment. The latter, however, is partly mitigated by the company’s liquidity management and efforts to diversify into capital markets and its diverse investor base (e.g. insurance companies, bond funds).

The Stable Outlook underlines Fitch’s expectation that the company will maintain its adequate capitalization and enforce risk governance while pursuing aggressive growth. Rating upgrade is unlikely in the near- to medium-term as the company is constrained by its small size by global peer comparison. Negative rating drivers would be significant deterioration in Chailease’s and/or the group’s (Chailease Holding Company Ltd. (Cayman) or Chailease Holdco ) credit profiles, including asset quality and capitalisation/leverage, arising from its growth strategy, particularly in China, or from a weaker economic outlook.

Established in 1977 and merged with CITC Company in 1995, Chailease is the largest leasing company in Taiwan with an around 45% market share. It mainly provides leasing and instalment finance to SMEs for their purchase of raw materials, machinery, equipment, etc. Chailease is fully owned by and the principal subsidiary of Chailease Holdco, which was created in 2009 and was listed in Taiwan in December 2011. Andre Koo and his allies collectively controlled a majority stake in Chailease Holdco and four out of nine board seats. Chailease’s geographical coverage includes its home market in Taiwan and a moderate portfolio in Thailand, Vietnam and the U.S. Chailease Holdco has a growing presence in China.